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Deloitte comment letter on tentative agenda decision on IFRS 9 — Credit enhancement in the measurement of expected credit losses

Published on: 07 Mar 2019

We have commented on the IFRS In­ter­pre­ta­tions Committee's pub­li­ca­tion in the November 2018 IFRIC Update of the tentative decision not to take onto the Committee's agenda the request for clarification on whether the cash flows expected from a financial guarantee contract or any other credit enhancement recognised separately in the financial statements can be included in the measurement of expected credit losses of the financial asset to which it relates.

We agree with the IFRS Interpretations Committee’s conclusion that if a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of expected credit losses. However, we note that IFRS Standards do not specifically address when separate recognition of a purchased credit enhancement is required.

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